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Ireland Witnessing A Resurgence In FDI Inflows

01 Feb | By Smart MBS
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Ireland Witnessing A Resurgence In FDI Inflows

Ireland’s FDI background

Ireland has for many decades been an attractive location for foreign direct investment. According to the Department for Trade, Enterprise, and Employment, FDI is responsible — either directly or indirectly — for around 20 percent of private sector employment in the Republic, and this investment contributes significantly to the State's coffers.

Investors view Irish ventures favourably due to Ireland’s attractive corporate tax regime, well-developed technological and business infrastructure, generous investment support schemes, membership of the European Union, and Ireland's highly skilled and educated workforce.

Key sectors in which FDI activity has traditionally thrived have included life sciences, content and business services, technology, and international financial services.

Recent events and recovery?

Ireland saw a surge in investment after the UK decided to leave the European Union. However, whilst Brexit was something of a known quantity, the COVID-19 pandemic and its impact on FDI levels came completely out of left field, and globally FDI figures took a significant hit.

According to data released by the OECD in May 2021, worldwide FDI flows fell to USD846bn in 2020, down 38 percent compared with 2019.

Both FDI income paid by affiliates in OECD countries to foreign parents and FDI income received by OECD parents decreased by around 15 percent in 2020. However, by early 2021, cross-border mergers and acquisitions activity had rebounded.

The pandemic also impacted FDI inflows into Ireland initially. However, the impact of COVID-19 was only fleeting. According to figures from inward investment agency IDA Ireland, “strong gains” were seen in 2021 relative to 2020.

It announced in December 2021 that total employment in IDA client companies in Ireland stood at 275,384, up 16,826 on 2020. 104 of the 249 investments won in 2021 were new name investments, it said, describing this as "a better than anticipated new name performance considering the ongoing restrictions due to the pandemic."

Irish Prime Minister Leo Varadkar said at the time that: "The success of our multinational sector has allowed us sustain other areas of our economy that are struggling. FDI is central to our economic policy and it will continue to be a crucial part of our plan to rebuild after Covid."

Incentives and supports

As touched on above, Ireland offers a number of supports to new investors, including highly attractive tax reliefs for research and development activities. There are also a combination of domestic and European funding streams available, via IDA Ireland, Enterprise Ireland, and other agencies. These include funds to assist with training, modernization, research and development, mentoring, marketing assistance, and specific projects.

Looking to the future

Although significant changes are in the offing, with Ireland now poised to raise its corporate tax rate to 15 percent in line with international tax reform proposals, the Irish Government is redoubling efforts to ensure that Ireland offers a proposition to investors that remains well ahead of its peers'.

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Topics: Ireland, FDI

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